Asked by
Rowdh Alhammadi04
on Oct 27, 2024
Verified
Which of the following statements incorrectly describes the accounting for bonds that were issued at a premium?
A) The market rate of interest is less than the coupon interest rate.
B) The interest expense over the life of the bonds will be less than the cash interest payments.
C) The present value of the bonds' future cash flows is less than the bonds' maturity value.
D) The book value of the bond liability decreases when interest payments are made on the due dates.
Market Rate
The prevailing interest rate available in the marketplace on investments or loans.
Coupon Interest Rate
The annual interest rate paid on a bond’s face value by the issuing entity, also known as the nominal rate.
Bond Issued At Premium
Occurs when a bond's selling price is higher than its face value, indicating investor confidence or lower-than-average interest rates.
- Examine the effects of issuing bonds at a premium or discount on the financial reports.
Verified Answer
LZ
Learning Objectives
- Examine the effects of issuing bonds at a premium or discount on the financial reports.